A draft European Commission update of EU Emissions Trading System (EU ETS) product benchmarks for the 2026–2030 phase, reported by Carbon Pulse on 2 April 2026, shows more lenient reductions for certain chemicals subsectors and refined petroleum products compared to earlier expectations. At the same time, the draft maintains steeper cuts to "fallback" benchmarks — values applied to installations in sectors that lack product-specific benchmarks — which analysts say could be net bullish for EUA prices as these installations will receive less free allocation than previously assumed.
EU ETS product benchmarks determine how many free EUAs industrial installations receive each year without paying. They are set based on the top-10% most carbon-efficient producers in each sector, multiplied by production volume. Benchmarks are updated every five years. The current phase covers 2021–2025; the forthcoming update applies from 2026 to 2030 and will directly shape how much net carbon cost EU industry faces in the next half-decade.
According to the leaked draft, several chemicals subsectors — including E-PVC and some other products — and refinery benchmarks face lower-than-anticipated reductions. This means these industries will retain more free allocation than feared, reducing their net EUA purchase requirements. However, fallback benchmarks — which affect a wide swathe of miscellaneous installations — face steeper cuts, increasing their effective carbon cost. The Commission plans to formally propose the benchmark update after Easter 2026, opening a consultation period before finalisation.
Free allocation levels directly determine how much EUA demand comes from industry. Sectors receiving less free allocation must buy more allowances on the market, tightening supply for compliance buyers and potentially supporting EUA prices. Combined with the approximately 8% reduction in total EUA supply in 2026 versus 2025, the structural direction of the EU ETS remains toward higher carbon costs for heavy industry — with or without benchmark relief for specific products.
TrustVal Commentary: Benchmark updates translate directly into corporate carbon budgets. Sectors facing tighter free allocation — particularly those under the steeper fallback benchmarks — will see increased net EUA purchase costs and growing incentive to develop or procure offsets. TrustVal monitors EU ETS policy developments as part of our carbon strategy advisory for industrial clients.
Primary source: Carbon Pulse — Leaked EU ETS benchmarks update
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